THE REPUBLICAN TAX BILL WOULD TRIGGER AUTOMATIC CUTS
IN MEDICARE AND OTHER VITAL GOVERNMENT PROGRAMS
August 25, 1999

Republican Tax Bill Drains Resources Needed To Secure Medicare, Protect
Social Security Surpluses, Pay Down the Debt, and Prevent Deep Cuts in
Key Priorities From Education to Agriculture to Public Safety to
Science. The Republican tax bill, and the associated interest costs,
would use up the entire $1 trillion non-Social Security surplus and,
assuming it continued, would explode between 2010 - 2020, right at the
time when the baby boom generation begins to retire, Medicare is
projected to become insolvent, and Social Security comes under strain.
Under the Republican budget resolution, key priorities including
education, agriculture, public safety, and science would be cut by
nearly 50 percent by 2009. (This assumes that the Republicans fund
defense at levels requested by the President.)

New Analysis in report released today from the Office of Management and
Budget: As Written, GOP Tax Bill Would Over Next 5 Years Trigger
Automatic Across-the-Board Cuts That Would Cut Medicare by $41.4 billion
& Entirely Eliminate Key Federal Programs Including Veterans Education
and Training, Farm Safety Net and Child Support Enforcement Programs.
The Republican tax cut bill as written would, under existing law,
automatically trigger across-the-board spending cuts in the budget
(known as sequestration). These cuts would automatically come from
mandatory programs, resulting in a $41.4 billion cut in Medicare over
the next 5 years (2000-2004), according to today's Office of Management
and Budget analysis. These cuts would also force the complete
elimination of key federal programs, including farm safety net programs
like CCC and crop insurance, veterans education and training benefits,
child support enforcement, and Social Service Block Grants, which
support child care for low-income families and Meals on Wheels for
senior citizens.

Over the next 5 years (2000-2004), these automatic across-the-board cuts
would:

Cut Medicare by $41.4 billion. Despite the fact that many
Republican Members of Congress have written to the President asking that
certain savings agreed upon in the Balanced Budget Act of 1997 be
repealed, the GOP tax plan would cause Medicare spending to be cut by
$41.4 billion from 2000 - 2004. This would impose further reductions in
Medicare payments to all providers (including hospitals, physicians,
home health agencies, and skilled nursing facilities).

Eliminate Farm Safety Net Programs (Crop Insurance and CCC) by
cutting $19.3 billion. Despite the fact that the Senate has just passed
a bill that provides approximately $7.4 billion in 2000 emergency
assistance to the Nation's farmers, the Republican plan turns around and
cuts $19.3 billion from farm safety net programs, even though this is a
time of nationwide low commodity prices and regional droughts that are
withering crops and livestock. Simply put, while the Republicans claim
to be adding $7.4 billion for farmers, their tax plan would cut more
than twice as much from key programs that assist farmers.

As a result, the Agriculture Department's crop insurance program would
shut down starting in 2002. Without insurance, most farmers and
ranchers could not secure the financing from banks needed to operate
their farms and ranches. It would also eliminate assistance to farmers
through the Commodity Credit Corporation, which provides the funding for
core income and price support assistance programs for farmers, at a time
when many farmers are enduring the worst farm economy in decades. In
addition, with U.S. agriculture heavily dependent on exports, these cuts
would end USDA's export credit programs that guarantee billions of
dollars of farm exports a year.

Eliminate Veterans Readjustment, Education, and Training Benefits
by cutting $3.2 billion. These cuts would deny education benefits and
training to more than 450,000 veterans, reservists, and dependents who
are eligible through the Montgomery GI Bill and the Vocational
Rehabilitation and Counseling Programs. This would mean that these
veterans, reservists, and dependents would lose access to the education
and training programs many were promised (and paid into) when they
enlisted. It would also mean that job and other assistance would be
eliminated for 50,000 disabled veterans who have employment disabilities
sustained on active duty.

Cuts Student Loans. Guaranteed and Direct Student Loan Program
borrowers would have their origination fees increased by one-half of a
percentage point beginning in 2000. Over 5.5 million beneficiaries
would be affected.

Eliminate Child Support Enforcement by cutting $10.3 billion.
Federal funding for Child Support Enforcement would be eliminated
beginning in 2002 and many states would no longer be able to continue
this critical program. In 1998, this program collected $14.3 billion on
behalf of children and families, and helped many low-income families
move from welfare to work.

Eliminate Social Services Block Grants (SSBG) by cutting $4.4
billion. Beginning in 2002, SSBG would be eliminated. SSBG provides
funding to States to support a wide range of programs including child
protection and child welfare, child care, as well as services focused on
the needs of the elderly and handicapped. The inherent flexibility of
this grant helps states to target funds to meet needs in their
communities.

Even With the Reduction or Elimination of These Key Programs, the
Republican Tax Cuts Would Still Mean Roughly 50 Percent Cuts in
Non-Defense Discretionary Spending by 2009 Cutting Medicare and
eliminating of these key programs (triggered automatically by the
Republican tax bill) would still not cover the full cost of the
Republican tax bill. If the Republicans were to meet the President's
defense budget and refrain from dipping into the Social Security
surplus, they would have to make unfathomable cuts - nearly 50 percent
across-the-board in domestic programs -- from education to agriculture
to the FBI to the FAA to medical research by 2009. Even this analysis
understates the potential harm of the Republican tax plan, because it
does not allow any resources to extend Medicare solvency even though
Medicare is scheduled to become insolvent in 2015 and most experts would
agree that Medicare's long-term solvency could only be secured with
additional resources.